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Just want to add something important about QBID calculations that nobody mentioned. Make sure you're accounting for the "taxable income limitation" too. Your QBID can't exceed 20% of your taxable income AFTER subtracting net capital gains. So if a big chunk of your income is from capital gains, that could be why you're seeing a lower QBID number than expected. I made this mistake last year and couldn't figure out why my deduction was smaller than the 20% of QBI I was calculating manually. Also, if your K1 Box 20 has code Z with multiple amounts listed, make sure you're entering ALL of them into FreeTaxUSA. The software needs each component to calculate correctly.
That's a great point that I hadn't considered. We did have some capital gains last year from selling some stocks (about $35,000). Would that really affect the QBID calculation that much? I didn't realize capital gains would impact this.
Yes, capital gains definitely impact the calculation! The 199A deduction is limited to 20% of your taxable income MINUS net capital gains. So in your case, if you had $35,000 in capital gains, your effective taxable income for QBID purposes would be reduced by that amount. For example, if your taxable income was $200,000 including $35,000 capital gains, your QBID would be limited to 20% of $165,000 ($200,000 - $35,000), which is $33,000. Even if your QBI was higher, you couldn't take more than that $33,000 as your QBID. This is a commonly overlooked limitation that can significantly reduce the expected deduction.
Has anyone else noticed that FreeTaxUSA sometimes struggles with complex K1 entries? I had a similar issue with the 199A deduction last year but found a workaround. Try downloading and installing the free IRS QBID worksheet (just google "IRS Section 199A worksheet") and calculate it manually first. Then you can see exactly where the software might be making different assumptions. For me, the issue was that FreeTaxUSA was applying an aggregation method for multiple businesses that wasn't appropriate for my situation. I ended up switching to TaxSlayer which handled it better for my specific case.
Former tax preparer here. For amounts this small, it's really not worth amending. The IRS computer systems have tolerance thresholds built in, and a $4 difference won't trigger any action. If you really want to be 100% by the book, you can file a paper amendment for free, but honestly, the postage stamp would cost almost as much as the tax owed. Most practitioners I know wouldn't bother with an amendment for anything under $50 in tax difference.
If they do have these threshold amounts, why doesn't the IRS just publish them? Seems like it would save everyone a lot of time and stress over tiny amounts.
They don't publish the exact thresholds for a strategic reason. If everyone knew precisely what amount they could "get away with" not reporting, many people would deliberately stay just under that threshold, and the cumulative effect across millions of taxpayers would be significant. The IRS wants everyone to report everything accurately, but they have to allocate their limited enforcement resources effectively. They keep these internal tolerance levels confidential and also change them periodically to prevent systematic abuse.
Quick question - if I'm in a similar situation but I OVERPAID by a small amount ($10-20) because I missed a deduction, is it worth amending to get that money back? Or is the same "too small to bother" rule apply?
For overpayments, the calculation is different. You're getting YOUR money back, so it depends on how much your time is worth. A refund of $20 might be worth the 30-45 minutes it takes to prepare and mail a paper amendment. Remember though, paper amendments can take 6-12 months to process currently, so you'll be waiting a while for that $20.
Just to add another perspective: I run a TTRPGing business similar to yours, and I did actually set up an LLC taxed as an S-corp because my income got high enough. I pay myself a salary of $3,500/month which is "reasonable" for a TTRPG creator in my area, and then take distributions for the rest. The paperwork is a pain and I pay about $1,200/year for a bookkeeper to handle the quarterly filings, but I'm saving around $7,400/year in self-employment taxes. If you're making under $40k profit, stick with sole proprietor and focus on maximizing your deductions instead.
How did you determine what's a "reasonable" salary for a DM? I didn't think there was enough data for that kind of job to establish market rates.
I researched what other professional DMs and TTRPG content creators charge hourly in my area and nationwide, then calculated what a full-time equivalent would earn. I also looked at similar creative professionals like game designers and tabletop gaming store managers. I documented all this research in case of an audit. The key is having a methodology that shows you didn't just pick a low number to avoid taxes. My CPA helped me gather comparable profession data that would stand up to scrutiny. With niche professions like ours, you need to get creative with finding salary comparisons, but there's actually more data out there than you might think now that professional DMing has grown as a career.
Don't forget about quarterly estimated tax payments if you're self-employed! I learned this the hard way with my editing business last year - got hit with a $420 penalty because I waited until April to pay everything.
How do you even calculate how much to pay quarterly when your income fluctuates month to month? My crafting business is super seasonal and I have no idea what I'll make until I make it.
Just a tip from someone who works in accounting - ALWAYS make sure to write your SSN and the specific tax year on any check you send to the IRS. This is really important! And keep copies of everything, including the check, coupon, and any correspondence. The IRS is known for misapplying payments and you'll want evidence of your intent. Also, if your existing payment plan doesn't include the new tax year, you technically are in violation of the terms if you incur new tax debt. They can terminate your agreement. You should definitely contact them to modify your existing agreement to include the new tax year.
Is there a specific form to fill out to modify an existing payment plan to include a new tax year? Or do you have to call?
You can use Form 9465 (Installment Agreement Request) to modify an existing agreement. Check the box that indicates you're revising an existing agreement. Include your current agreement number if you have it. You can also do this online through the IRS payment plan tool if your total debt is under $50,000. Look for the option to revise an existing agreement. It's generally faster than submitting a paper form, and you'll get immediate confirmation when it's processed.
I learned the hard way that sending a payment doesn't automatically add the new tax year to your payment plan!!! Sent in my 2023 payment last year while on a plan for earlier years and got a scary letter about defaulting on my payment agreement even though I paid the new amount. Had to call and fix it. Definitely contact the IRS first to officially add your 2024 tax to your existing plan before sending payment. And when you do send it, write "Apply to 2024 Form 1040" directly on the check.
Alfredo Lugo
Pro tip: If you're choosing between H&R Block and TurboTax mainly for the Rakuten deal, check both services before deciding. Sometimes TurboTax offers better cash back percentages than H&R Block. Right now H&R Block is higher at 16%, but that can change throughout tax season. I've seen TurboTax go up to 20% cash back at times.
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Emma Morales
ā¢Thanks for this! Do you know how often the cash back percentages change? Should I wait until closer to the filing deadline to see if the rates go up?
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Alfredo Lugo
ā¢The cash back percentages typically change every 2-4 weeks, sometimes more frequently during peak tax season. They usually increase as we get closer to April 15th, but there's no guarantee. Last year the highest rates were actually in mid-March, then they dropped slightly in April. If you don't need to file immediately, checking back every week or so might help you catch a better rate. Just don't cut it too close to the deadline in case of technical issues.
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Sydney Torres
Don't forget you can also use coupons WITH the Rakuten cash back! I found a code for 25% off H&R Block Premium which stacked with the 16% Rakuten cash back. Just Google "H&R Block coupon codes 2025" and try a few until you find one that works.
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Kaitlyn Jenkins
ā¢This worked for me! Found a coupon for 20% off and it stacked with the Rakuten cash back. Ended up paying like $79 for Premium instead of $119, then got about $12 back through Rakuten. Every bit helps when you're paying taxes!
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